RBI defers Indian Accounting Standards implementation by banks | Daily Current Affairs 2021

RBI defers Indian Accounting Standards implementation by banks

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In a desperate attempt that would spare the country’s banks from adding another layer to the USD 190 billion pile of bad loans on their books, India delayed the introduction of tough new accounting rules for the second year running,

The Reserve Bank of India said that legislative amendments needed to implement the new Indian Accounting Standards are still under consideration by the government.

The new rules based on the IFRS9 standards created in the aftermath of the financial crisis were supposed to kick in at the start of the new fiscal year that starts on April 1, after being delayed last year. According to Fitch Ratings’ local unit, India’s state-run lenders would have had to increase provisions by as much as 1.1 trillion rupees (USD billion) in the fiscal first quarter ending June 30 if the rules had gone ahead. That would have forced public sector lenders to raise ‘substantial’ amounts of extra capital, beyond the estimated 1.9 trillion rupee infusion already committed by the government for the two-year period to the end of this month.

It should be noted that the RBI delayed the implementation of the new standards a few days into the start of the current fiscal year, citing the need for legal changes and more preparatory work by the country’s banks. The new accounting standards would require banks to make provisions when they judge that a loan is likely to sour, rather than waiting for the borrower to start missing payments.

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